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> Now, the IRS knows almost everything about your finances. They get electronic data from your employers, your bank, your brokerage. Most of commerce is settled

by ethbr1 2y ago

> Now, the IRS knows almost everything about your finances. They get electronic data from your employers, your bank, your brokerage. Most of commerce is settled electronically. Afaik, this is both true and not. The IRS gets very specific data points, that institutions are required by law to give them. That's largely a complete picture of your income, at least from sources that are required to report. What they have no idea about is your expenses or classification thereof. If we decided to move to a progressive (more money = higher rates) and no exemption/deduction system, then the IRS would have everything needed. But in fact we have a spaghetti of deductions, because it's far easier to sneak a special interest deduction into the tax code.

prepend 2y ago
The difference is that they used to not get that info. When I started filing taxes way back in the olden days, I had to mail a copy of my W2 to the IRS. I could alter it, not include it, whatever. So audits would verify all that. Now w2s are sent electronically along with 1099s and everything else. So it’s not perfect, but it’s much easier on the IRS now, than it used to be. For most people, there are no expenses. You could lie about kids but you need socials. You could lie about tax or mortgage deductions but those data are sent to the IRS by institutions. You could lie about charities, but again that’s sent electronically. There are some edge things, but they are really edge because most filers don’t have any deductions that are easy to lie about without detection.
- Atotalnoob 2y ago
  Your W2 is sent to the irs from your employer, so them not matching would cause a giant red flag
- deleted 2y ago
  [deleted]
- sokoloff 2y ago
  > You could lie about charities, but again that’s sent electronically. I do not think this is the case. Taxpayers have to have records to substantiate in an audit, but I don’t believe that information is filed with the IRS by the charity. (I’ve never been asked for, nor provided, my SSN when making donations over the decades.)

by ethbr1 2y ago

prepend 2y ago

The difference is that they used to not get that info. When I started filing taxes way back in the olden days, I had to mail a copy of my W2 to the IRS. I could alter it, not include it, whatever. So audits would verify all that. Now w2s are sent electronically along with 1099s and everything else. So it’s not perfect, but it’s much easier on the IRS now, than it used to be. For most people, there are no expenses. You could lie about kids but you need socials. You could lie about tax or mortgage deductions but those data are sent to the IRS by institutions. You could lie about charities, but again that’s sent electronically. There are some edge things, but they are really edge because most filers don’t have any deductions that are easy to lie about without detection.

Atotalnoob 2y ago
Your W2 is sent to the irs from your employer, so them not matching would cause a giant red flag
deleted 2y ago
[deleted]
sokoloff 2y ago
> You could lie about charities, but again that’s sent electronically. I do not think this is the case. Taxpayers have to have records to substantiate in an audit, but I don’t believe that information is filed with the IRS by the charity. (I’ve never been asked for, nor provided, my SSN when making donations over the decades.)